CAPE CORAL, Fla.-As housing values and sales continue their fall nationally, analysts in some markets believe they may now be seeing the floor.
The housing bust crushed states like California, Arizona, Nevada and Florida, and areas such as Las Vegas, Cape Coral-Fort Myers, and Modesto populate the list of the top 10 highest foreclosure rates in the nation. In some markets, according to the National Association of Realtors, home prices are 60% off their peaks.
But as foreclosures and short sales become the norm, real estate sales sale volumes are moving somewhat higher while new construction remains at record lows-prompting hope that vultures will soon chew up the existing inventory and move prices higher in the near future. Cape Coral, one of the sites of two developments that bankrupted the now-defunct Norlarco Credit Union, is experiencing a surge in home buying as properties move quickly into the hands of long-term investors and owner-occupants.
Sale volume of single-family homes and condos shot up 98% year over year in 2008, noted Realtors Association of Cape Coral President Paula Hellenbrand, with about 40% of those being distressed sales.
"I've seen a very significant percentage of the buyers being first-time homebuyers that were priced out of the market in the past three, four and five years that can now have a mortgage payment that is equal to or less than rent," she added. "$100,000 will buy you a brand new house; not a bad deal for a first time home buyer."
In Las Vegas, volumes have returned to 2004 levels. "Our sales numbers are coming back, but of course the values of the sales are not what they were in the inflated market," said Sue Naumann, president of the Greater Las Vegas Association of Realtors. "Our problem that we have now is that banks are afraid to loan-that's the issue."
Though analysts were expecting a modest uptick, month-to-month sales of existing homes nationwide fell in January by just over 5%, with the northeast experiencing the worst drop, declining by 14.7%. The south as a whole saw a 5.7% decline while sales in the West remained flat. But despite the nasty short-term news, housing sales in the boom-gone-bust regions continue to show a longer-term rising trend as sales in the West were up 29% compared to Jan. 2008.
During the housing frenzy, values shot up so high that many working and middle class individuals were unable to buy any property. But after sitting on the sidelines for years in rentals, they now have a chance they were never afforded in years past. With their superior capital positions, local credit unions could also join in that opportunity.
"Now with the prices having been adjusted by the market, it's a perfect opportunity for them. We now do have workforce housing but if they can't get a loan; that's the biggest issue," Naumann said.
Attractive Rates And A Tax Credit
Local financial institutions are also benefiting from attractive mortgage rates and a $7,500 tax credit that could entice potential buyers on the fence to pull the trigger.
"Like everybody else we've been seeing an increase compared to a couple months ago," said Tom Dorety, CEO of Suncoast Federal Credit Union, which has a huge presence in southwest Florida. The $6-billion credit union's call center in the region has experienced much higher volume in the last few weeks than any time during the past 12 to 18 months.
"We've got 170 [mortgage] applications in Hillsboro County and almost 150 in Lee County," Dorety pointed out. "Half of those in Lee County (Cape Coral-Fort Myers) are purchases while the others are refinancing. Hillsboro (Tampa) is about one-fourth purchases."
According to an October Center for Economic and Policy Research report, both Cape Coral-Fort Myers and Orlando have lost their status as "bubble" cities and their housing values are projected to actually increase this year.
"When you've had prices falling 60%, how much farther can you go?" Dorety mused. "There is an incredible opportunity to invest in the community and I think we're at that point. We have some opportunities to make good decisions and good loans in those areas."
Still, the fallout from the bubble's bursting may not yet be fully realized. Unemployment spiking into the double digits is putting additional pressure on values and there is the possibility that another slew of foreclosures could restart the vicious cycle.
"The reason why our volume in sales has picked up is because of a lot of the foreclosure sales coming on the market, and foreclosure sales are driving down prices," said California/Nevada League economist Terrin Griffiths, noting "people will have to buy homes before they go into foreclosure" to stem the real estate value bleeding.
"We're seeing more cash buyers, but it's back to the old days where you have to have good credit, have some money to invest," she said. "With the days of the fog and mirror loans gone, it's a perfect time for a true investor to increase his rental portfolio."
